Student Debt Rising Due To Higher College Costs

Student
Debt Rising Due To Higher College Costs

For
Immediate Release: September
7, 2005

Contact: Lynn
Erskine, 202-293-5380 x115

Washington, DC: The average indebted
graduating senior was $17,600 in debt on graduation day last year, according to
a study by the Center for Economic and Policy Research. Nearly two-thirds of
students attending a four-year public college or university take on student
loans, and loans now comprise over half of financial aid packages, up from about
one-fifth in the 1970s.

The report, "Student Debt: Bigger and Bigger," found that expenses at
public four-year universities have risen 59.4 percent since 1990, with private
university expenses increasing 51.1 percent (adjusted for inflation). High
levels of student debt are the result of rapidly increasing college costs and
policy choices that have made more loans -- but not grant aid -- available to
students.

"American students are graduating with more debt than ever. We are handing
college graduates a bill for more than $17,000 when they receive their
diploma," said Heather Boushey, CEPR economist and author of the study.
"Working your way through college is no longer possible with such a low
minimum wage and few grants available to students."

Analyzing data from the College Board and the National Center for Education
Statistics' "National Postsecondary Student Aid Survey," CEPR found
that students are taking on more loans to cover rising college costs. Another
recent development has been the increase in nonfederal loans, of which the
majority are private sector loans (94 percent in 2004) and the remainder are
state government loans.

In 2003-04, graduates of public four-year institutions owed an average of
$15,662 and graduates of private four-year institutions owed an average of
$22,581. The report also found that students from lower-income families who
attend public schools are one-third more likely to take on debt than students
from high-income families.

In 1981, college students could work full-time all summer at a minimum wage job
and earn about two-thirds of their annual college costs, leaving less than
$2,000 (in inflation-adjusted 2004 dollars) that they needed to pull together
from grants, loans, working during the school year, or their parents. Today,
however, students earning minimum wage would have to work full-time for one year
in order to afford one year of education at a four-year public college or
university.

Higher levels of student debt have implications for how students think about
career and life-choices. Highly indebted college graduates may choose to
postpone marriage, buying a house, or starting a family in order to pay off their
loans.

The Center for Economic
and Policy Research is an independent, nonpartisan think tank that was
established to promote democratic debate on the most important economic and
social issues that affect people's lives.